While Mexican steel consumption is quite strong, domestic producers arent feeling as much of a benefit as would be expected due to a combination of rising imports and foreign investment.
With a number of Mexican steelmakers purchased by foreign companies over the past 20 years, there really isnt as much of a Mexican steel industry as there used to be, said Al Zapanta, president and chief executive officer of the U.S.-Mexico Chamber of Commerce.
Mexico used to be a leader in both the production of steel and the manufacture of specialty parts, but that has changed, Zapanta said, noting that Mexican-owned companies have produced virtually no steel pipe since the countrys largest pipe mill, Tubos de Acero de Mexico SA, was acquired by Tenaris SA nearly 10 years ago. Also, there arent as many domestically owned plate producers as there used to be.
This, combined with growing steel imports, led Mexican crude steel production to fall 2.8 percent to an estimated 17.6 million tonnes last year from 18.1 million tonnes in 2011, according to Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa., despite apparent steel consumption that was forecast to reach a record 21.5 million tonnes in 2012. Mexican mills shipments of finished steel were expected to fall 2.5 percent last year, with Mexican imports rising a whopping 44.1 percent and Mexican exports falling 23.6 percent, he said.
The volume of imports could appear to be deceptively high, with some steel products--including material from the United States and Canada, the countrys largest trade partners--not produced in Mexico, Zapanta said.
However, another North American steel market observer said that with the steel market in China and elsewhere in Asia softening, and with Mexican trade law enforcement less stringent than in the United States, a good percentage of the steel imports have been unfairly traded.
There is hope that the business environment will pick up, at least modestly, for Mexican steelmakers. The domestic steel market is growing by bits and pieces, Zapanta said.
Integrated steelmaker Altos Hornos de Mexico SA de CV, for example, is set to increase its crude steel capacity by about 40 percent starting in the first quarter of 2013, largely through the completion of its Fenix project, which includes a 1.4-million-tonne-per-year blast furnace, a 1.2-million-tonne electric-arc furnace, a 1.2-million-tonne slab caster and a 1-million-tonne plate mill.
This and other expansion projects, some of which are at foreign-owned steelmaking facilities, could keep some imports out and increase steelmakers ability to export, Plummer said. He predicted that Mexican crude steel production would rise about 8 percent in 2013, with mill shipments increasing 7.5 percent and imports falling 2 percent, although Mexican exports are forecast to decline another 7.1 percent.